Employer of Record in Italy

The EOR (Employer Of Record) solution for Italy helps your company grow there without setting up a corporation. The onboarding of remote staff, handling their payrolls, etc., is a simple procedure thanks to its global HR platform.

By abiding by all local rules, our global network helps you expand your business in the nation. Italy is the perfect location for firms looking to expand into new markets due to its talented workforce and strong economy. With our knowledge of the Italian market, you can now set up your team in Italy more quickly than before.

Overview of Italy

• Population: 60.4 million (2019)
• Currency: Euro 
• Capital city: Rome
• Languages spoken: Italian, French
• GDP per capita: 33,228.24 USD ‎(2019)

Employment Landscape in Italy

Employers may have difficulties given that the Italian labour market is recognized for its stringent laws and significant emphasis on defending employee rights. It can be difficult and expensive to navigate the different regulatory requirements and ensure compliance with Italian labour and employment regulations. To increase the flexibility of the labour market, Italian legislators have introduced measures in response to recent economic shifts and the global economic crisis.

The Italian legal system has a hierarchy of sources that determines how employee contracts and labour relations are governed. The Italian Constitution has supreme jurisdiction, followed by Section III of the Civil Code (Articles 2094–2134), which deals with the work relationship. The rights and responsibilities of both employers and workers are outlined in these clauses.

Furthermore, the Italian parliament passed extensive labour and employment laws throughout the country. The statutory framework is further supplemented by several rules made by government authorities. Negotiated collective bargaining agreements between employers’ groups and trade unions also significantly influence how labour relations are shaped in Italy.

Customs and practices are used when law rules or collective bargaining agreements do not address a particular issue. It’s crucial to remember that while customs could give workers extra benefits, they can’t take the place of specific employment contracts.

Due to the difficulty of the Italian labour market, it is essential for employers to get professional advice and assistance to ensure that they are adhering to all relevant rules and regulations. Working with an Employer of Record (EOR) may be very helpful in navigating the Italian labour market and successfully managing employment agreements. An EOR may assist in streamlining compliance procedures, ensuring conformity with regional legislation, and offering advice on labour-related issues.

Entitlements	Explanation
Statutory Working Hours	No more than eight hours of work per day or forty hours per week should be put in.
Paid Public Holidays	The public holidays in Italy for 2021 are as follows: New Year’s Day ( 01 January ) Epiphany (06 January) Easter Sunday (04 April) Easter Monday (05 April) Anniversary of Liberation (25 April) Labor Day (01 May) Republic Day (02 June)
Annual Leave Entitlements for overseas employees	A worker is legally entitled to 26 days of vacation every year. It is determined by the number of calendar months worked. There is no cap on the total number of days that can be earned if the employee does not use the leave; it is simply carried over to the next year. If an employee is fired or sent home, all unused vacation time should be paid to them. Italy, a labour-friendly nation, permits employees to use all of their paid time off as they see fit and cannot require them to do so.
Medical Leave	In accordance with Italian labour law, employees are entitled to a pay period of three working days per year in the event of serious illness or the loss of a spouse or other close relative.
Maternity Leave	Employees who are female are entitled to maternity leave for two months prior to and three months following the anticipated due date; during this time, they are paid through the social security system on a daily basis equal to 80% of their prior earnings.
Leave Expiry	Only then is the contract eligible to be changed into an indefinite one. If employment continues for 10 days beyond the end of the leave, the employer must pay 20% more; for 20 days after the termination date, 40% more.
Employee protection and anti-discrimination rights	Diverse influences may be seen throughout the history of Italian laws against job discrimination. The Italian Constitution, which is the main source of law, declares that “all people have an equal social dignity before the law, regardless of their sex, race, language, religion, political ideas, personal or socioeconomic circumstances,” is the main source of law in Italy. The Constitution also states that people who perform the same type of labour are entitled to equal pay.
Potential Employer Liability for Violating Laws Prohibiting Discrimination and Harassment	Employers may face penalties if they are found guilty of discrimination based on protected characteristics. Additionally, any decisions regarding employment discrimination may be required to be published in a significant newspaper by an Italian court.

Contractors vs. Full-Time Employees

There are two primary types of working arrangements: full-time employees and contractors.

Full-time employees are individuals who are employed by your company and work dedicated hours for your organisation. They receive a fixed salary and are typically engaged in ongoing tasks and projects. As employees, they benefit from various legal protections and entitlements, including income tax deductions, social benefits, and other employment-related benefits. The employer is responsible for managing their day-to-day operations and ensuring compliance with labour laws. If you wish to end the employment relationship, you are generally required to provide a termination notice in accordance with applicable regulations.

Contractors, on the other hand, operate on a freelance or independent basis. They work on a project-by-project basis and often have multiple clients. Contractors are typically paid based on the specific tasks or projects they complete and may have their own rates or fee structures. Unlike full-time employees, contractors are responsible for their own taxes and do not receive benefits from the hiring company. They usually have greater flexibility in terms of their working hours and may use their own resources to complete the assigned work. Depending on the terms of the contract, the engagement with a contractor can be terminated at any time or with a short notice period.

When deciding between employing full-time employees or hiring contractors, it is important to consider the specific needs and nature of the work involved. Each arrangement has its own advantages and considerations in terms of cost, flexibility, legal obligations, and resource management. Consulting with legal and HR professionals can help ensure compliance with labour laws and determine the most suitable employment arrangement for your organisation’s needs.

Independent Employer	Full-Time Employees
Flexibility: In general, independent contractors are adaptable and easily expanded to give your business flexibility in project planning without requiring ongoing payments at times when expenditures may be made more profitably elsewhere.	Loyalty: Full-time staff frequently don’t work for other clients and instead focus solely on growing your business. Because the success of your company directly affects their professional success, they are much more dedicated to it and more inclined to put in a lot of work.
Experience: Independent contractors have a wealth of experience, including working with companies from around the world and breaking into new markets.	Knowledge: While contractors could have substantial knowledge, your full-time employee’s knowledge stays within the company. This enables the organisation as a whole to gain from the skills and knowledge of your employees rather than just a contractor’s part of the shared information.
Independence: Contractors work with a high degree of autonomy and sacrifice management time to focus on other tasks.	Clarity: One of the biggest benefits of full-time workers is that they are not subject to legal ambiguities or misclassifications. By accurately classifying someone as an employee instead of a contractor, it greatly reduces compliance problems and eliminates the risk of fines.

Both options offer several benefits. When choosing the best course of action for your business, individual needs must be taken into account. 

If you need a quick offshore contractor to help with a temporary assignment, hiring a contractor is typically your best bet. On the other hand, you should think about hiring a full-time employee if you want long-term help for entering a certain market or keeping knowledge in-house.

Recruitment In Italy

The recruitment process in Italy follows a relatively straightforward approach. Once the hiring requirements are identified and the job description is published, employers can utilise either an internal team or a partnering agency to seek out suitable candidates for the position. Professional social networking platforms like LinkedIn are widely favoured by recruiters in Italy for their ability to connect with top talent across various industries.

In addition to LinkedIn, there are several other well-known websites commonly used for recruitment purposes in Italy, including:

• indeed
• glassdoor 
• monster
• infojobs
• thelocal

The hiring procedure in Italy typically involves the following steps:

• Initial screening: Candidates who meet the criteria outlined in the job description undergo an initial background screening to assess their suitability. Based on this screening, a shortlist of candidates is created.
• Interview process: Shortlisted candidates go through a series of interviews, including technical rounds and HR rounds, to evaluate their skills, aptitude for the role, and compatibility with the company’s culture.
• Final selection: After a thorough evaluation, the most suitable candidates are selected. They receive a letter of intent or employment letter, and upon successful negotiation and signing, they officially join the company as employees.

Hiring through employment websites, social media platforms, or advertisements in Italy offers advantages such as access to a diverse pool of candidates with various experiences. It mitigates the risk of not finding suitable candidates or facing a shortage of talent in the job market. However, it also entails the challenge of sifting through numerous applications and selecting the most suitable candidates, particularly during the initial screening phase.

While apps like LinkedIn and Monster have gained some popularity in Italy, they may not be the sole platform for talent sourcing, particularly when seeking experienced professionals.

Hiring talented employees within a short time frame can be a complex task. Partnering with an Employer of Record (EOR) in Italy can be an excellent option, as it allows organisations to focus on other aspects of international expansion, such as project management and inventory management. An EOR handles compliance and legal matters while leveraging their knowledge of domestic employment practices and virtual onboarding tools to streamline the hiring process. Leading EORs also facilitate the e-signing of documents, enabling faster onboarding.

Probation And Termination

Information	Explanation
Probation Period	Employment contracts in Italy may include a probationary or trial period, which allows both the employer and employee to assess their suitability for the role. It is essential that the trial period is clearly stated in the employment contract and commences on the first day of employment, as mandated by Civil Code Article 2096.  The official trial periods in Italy are as follows: For employees not assigned to management functions, the trial period lasts for three months. For all other employees, the trial period extends for six months.  The specific duration of the probationary period may vary based on the employee category and is determined by the applicable National Collective Agreements (NCAs).  During the probation period, either party (employer or employee) has the right to terminate the contract without prior notice and without the obligation to provide any compensation.  It is important for both employers and employees to understand and adhere to the rules and provisions regarding trial periods outlined in the applicable employment contract and relevant regulations.
Work contract termination	According to Italian law, an employee may be fired for the reasons listed below: Just Cause: This relates to egregious misconduct on the part of the employee or any other action that renders it impossible to maintain the working relationship. Justified Grounds: These are employee duty infractions that fall short of the threshold needed to qualify as “just cause.” Examples could include disregarding important directives from the administration, harming equipment or facilities, or delivering subpar work due to subjective factors.  Written termination notifications that provide a thorough justification for the choice must always be given.  The following rules must be followed by employers: The employer has two alternatives for enterprises with up to 60 workers across Italy or up to 15 employees per working unit. They can either offer monetary compensation, which normally runs from two and a half to six months’ wages, or they can reinstate the dismissed employee. If the dismissal was judged wrongful, the employee is entitled to reinstatement and compensation for any monetary losses, which must equal at least five months’ pay. Failure to reinstate an employee who has been wrongfully terminated may subject the company to fines and a compensation sum equal to 15 months’ worth of wages.  Both taxes and social security contributions are not required for severance pay To maintain compliance with Italian labor laws, companies must carefully follow all rules and regulations pertaining to terminations.

EOR Solution

The ideal option to gain access to the Italian workforce without having to establish a subsidiary business is as an Employer of Record. It offers various advantages, such as removing the need to establish a distinct corporation, freeing up time and resources to focus on other aspects of expansion plans, and making legal compliance simpler. 

With the help of our knowledge, expanding a business can be done more quickly and at a lower cost without the need to form a separate team to handle all aspects of workforce management. Despite the fact that businesses may set up an organisation to engage their staff, managing workers, paying employees, and overcoming regulatory challenges can take time. Why not now? To learn how you may use our solutions for your company, schedule a demo right away.

Outsourcing employment through an EOR in Italy

Working with an Employer of Record will help you cut down on the time needed for the whole hiring process, including tax administration, payroll processing, and other related tasks.

Customised contracts, setting all procedures in conformity with local regulations, making it simple to alter current contracts, and convenient e-signing of papers are a few other advantages of working with a reputable EOR

Types Of Visas In Italy

Visa Category	Explanation
EU/EEA Nationals	In accordance with the idea of free movement of people, products, services, and money, citizens of the EU (European Union) and EEA (European Economic Area) do not need to apply for a work permit from the Italian government in order to work in Italy. Similar admission, residence, and employment rights apply to Swiss nationals as they do to citizens of other EU nations.
Non-EU/EEA Nationals	Non-EU/EEA nationals who want to work in Italy, whether temporarily or permanently, must first get a work visa from the Italian Consular authorities and a work permit from their intended employers. The granting of a work visa is dependent on a number of variables, including the applicant’s competency in their native tongue and particulars on the nature of the business and technology involved.  A quota system that regulates the entry and access of foreign nationals to the Italian labour market underlies the admission of non-EU migrant workers. As part of this program, the government establishes annual limits that control the number of authorised new admissions.  However, certain employees could be excluded from the quota system’s limitations. Particularly, those with pertinent technological profiles may be welcomed without any quantitative restrictions placed on them, making it easier for them to enter the nation and fill the demand for specialised capabilities.  To guarantee that their job in Italy is legal and allowed, it is crucial for non-EU/EEA nationals to complete the appropriate steps, receive the relevant permissions, and abide by the rules established by the Italian government.
Self-employment visas	The following self-employment activities are permissible for foreign nationals in Italy: As corporate leaders. As a contractor or in a technical position. In all circumstances, foreign nationals must get a self-employment visa.
Schengen visas	With a Schengen visa, the applicant is allowed to remain for up to 90 days for either touristic or professional reasons. Any nation in the Schengen region is open to travellers with a Schengen visa. Schengen visas can be obtained in a number of ways: Airport and transit visas (A and B visas) for Schengen visitors. C visa – Permits foreigners to stay in the Schengen area for up to 90 days for a variety of reasons, including business, medical treatment, sports, training, and tourism. D visa – This lengthy visa allows holders to stay in Italy for up to a year.
Family member visas	Family members travelling to Italy with a non-EU visitor or planning a visit with a visitor in Italy must apply for special visas at the Italian embassy in their previous place of residence. These visas enable relatives to work in Italy after receiving a relative residency permit for family needs. Family members with valid residency permits who entered Italy legally may be qualified for a special rejoining procedure.

Work Permits

Italy is an EU member and allows citizens of other EU members to work there without a visa or permission. Citizens of countries in the European Economic Area (EEA) are also free to work in Italy. ‘Nulla Osta (invariable visa)’ working visas are required for any employees who are not nationals of the European Union or the EEA. 

A working visa, commonly referred to as a national or D-Visa in Italy, is classified as belonging to the “long-stay category.” It should be noted that an Italian work visa only permits employees to enter the nation. To stay in Italy, they will require a residence permit when they arrive.

Payroll And Taxes In Italy

You must be aware of the regional regulations and the acts that govern those laws in order to set up payroll in Italy. Knowing your personal profile is crucial since it will enable you to determine which regulations are relevant and must be followed.

Another crucial activity that requires your attention is taxation. You may concentrate on growing your business operations by using the time and money you would have otherwise spent on hiring an EOR.

Information	Explanation
Remote Payroll	Using a completely outsourced service like a GEO or PEO, which would hire and pay the employees on their behalf, is one alternative for a non-resident firm to pay its workers in Italy (both local and international).
Local Payroll Administration	In some circumstances, a corporation may file in Italy using one of the forms offered but may decide to use a different company to manage its payroll. You may accomplish this with the aid of a payroll provider. It is crucial to keep in mind that the business, as the Employer of Record, is also totally responsible for ensuring compliance with all tax, immigration, payroll, and housing rules. On the other hand, a payroll business will handle all payroll computations, costs, and forms.
Internal Payroll	International businesses have the option of managing the local payroll for all staff members, domestic and international.
Fully Outsourced Payroll and Employment	Employers should use an EOR to handle the recruiting and pay of their employees in Italy. The simplest and shortest method for paying salaries to both Italian and international workers is this. For Italian employees, EOR manages all aspects of payroll, including taxes, withholding taxes, social security payments, and other legal requirements. Our EOR recruits workers on behalf of the customer and becomes the Employer of Record. Payroll and social security deductions are made at the source from employees’ yearly paychecks and are invoiced to the local governments. Before the paycheck date, our EOR sends the customer a yearly charge.

Taxation in Italy

Employer Taxation

Tax	Explanation
Corporate Taxes	Corporate income tax (IRES), a municipal tax on economic activities (IRAP), withholding tax, VAT, identity tax, social security taxes, transaction tax, and stamp duty are just a few of the taxes that businesses operating in Italy are required to pay. The current corporation tax rate in Italy is 27.5%.
Sales Tax	Before conducting business, everyone who makes taxable deliveries of goods and services under the Italian Value Added Tax (VAT) regime must register for an Italian VAT number, regardless of whether they are a person, partnership, corporation with share capital, or an institution. In 2016, 25% in 2017, and 25.5% in 2018, the new VAT rates went up.
Payroll Tax	No Payroll Tax
Withholding Tax	The following forms of income are subject to withholding tax (WHT) for non-residents of Italy: Unless a participation exemption applies, dividends are paid at a rate of 26%. Royalties: 30% of the whole amount, which results in an overall effective tax rate of 22.5%. Interest: A 26% final WHT. On savings accounts with banks and post offices, non-residents are not obligated to pay interest. A lower rate might apply under an applicable Double Tax Treaty.
Other Tax	Non-residents are only eligible for the International Road Assessment Program (IRAP) if their operations are carried out over a period of three months via a permanent location. Both resident and non-resident enterprises are liable to a regional tax on income obtained from economic activity in Italy.
Time to prepare and pay taxes	It takes approximately 240 hours.
Time required to start a business	It takes approximately 6.5 days.

Employee Taxation

Information	Explanation
Income Tax	Grossed income Tax Rate (%) 0-€15,000 23 €15001-28000 27 €28001-55000 38 €55001-75000 41 Over €75000 43 It should be noted that beginning with the fiscal year ending in 2016, an additional 3% tax will be applied to salaries over EUR 300,000.

Bonuses

As a 13th month wage at Christmas, bonuses are often granted at the employer’s discretion, although they are occasionally required by contracts or collective bargaining agreements as well, such as a summer vacation pay.

To secure a work permit for employees of a foreign company in Italy, it is necessary to establish an Italian subsidiary, branch, or representative office as the first step. Once this local entity is established, it can proceed with applying for a work permit on behalf of its employees.

The overall procedure typically involves three main steps:

• Authorization requests: Employers submit requests for authorization to the Immigration Single Desk (ISD) in Italy. This step involves providing the necessary documentation and fulfilling specific requirements outlined by the authorities.
• Visa requests: Prospective employees apply for relevant work visas in their home countries. These visa applications are based on the authorization obtained from the ISD and require the submission of supporting documents and compliance with the visa application process.
• Work permit application and issuance: Once the employees have obtained the necessary visas, the local Italian entity can proceed with applying for the work permits. This involves submitting the required documents, completing the application process, and ensuring compliance with the local regulations. Upon successful processing, the work permits are delivered to the employees.

Navigating these steps effectively requires a comprehensive understanding of the entire process and familiarity with the workings of the local authorities. In such cases, companies that specialise in providing Employer of Record (EOR) solutions can offer valuable assistance. EOR service providers possess the knowledge and expertise to guide foreign companies through the application process, reducing the likelihood of rework or delays and ensuring compliance with local requirements.